Rising U.S. Unemployment Urges Fed Action

ByJohn S. McClenahen Talk about a jobless recovery from the 2001 recession seems to become more real each month -- particularly in U.S. manufacturing. Factory job losses totaled 53,000 in February, as the overall economy shed 308,000 jobs and the unemployment rate rose one-tenth of a percentage point from January to 5.8%, says the U.S. Labor Department's Bureau of Labor Statistics (BLS). "Last month, job losses were widespread in manufacturing, with continued declines in industrial machinery, electronic equipment, fabricated metals, furniture and fixtures, and chemical products," says Kathleen P. Utgoff, BLS' commissioner. "Factory losses have been nearly continuous since April 1998 and have totaled nearly 2.5 million; most of the losses have occurred since the recession began in March 2001," she adds. "The manufacturing recovery has been the slowest on record, edging up just 2% over the past year," notes Jerry J. Jasinowski, president of the National Association of Manufacturers, Washington, D.C. "I do not foresee a general improvement until the situation in the Middle East is resolved and Congress enacts an economic growth package." Significantly, Merrill Lynch & Co., New York, now puts the chances of so-called double-dip recession for the U.S. economy at an even-money fifty-fifty. The Federal Open Market Committee (FOMC), the policy-making arm of the Federal Reserve System, "will at least move to an easing bias if not actually lower interest rates" at its next scheduled meeting on March 18, believes David A. Rosenberg, Merrill Lynch's chief North America economist. The influential federal funds rate, at least for the moment, remains at 1.25%, its lowest point in about 40 years. Presumably if the FOMC decides to lower the rate further, it would opt for a 25-basis-point cut to 1%.